Stocks could swing wildly once the election results are known, and those who make book on such things, effectively selling “insurance” against the unknown, aren’t taking any chances. It will cost investors an arm and a leg to straddle the bet. How much? Here’s a post from “Mavin” in the Rick’s Picks chat room that offers a precise reckoning of the odds: I don’t know how many of you are familiar with volatility and volatility risk. Volatility is not only priced in for the election, but also for an extended period of time after the election. Here is the interesting part of the volatility. We are seeing one of the highest volume and open interest in the volatility instruments. The implied volatility of the SPX for four days out, after the election, implies a 60-point move up or down. The implied volatility indicates that the six-day expiration indicates a 71-point move. So you are looking at ranges of 120 and 142 as your basic one-standard-deviation move — equivalent to a 1000-point move in the Dow. That is not the scary part. The probability of a touch is two times the implied volatility move. That gives you a probability of a touch 142 points in either direction or 120 points in either direction. There are several election outcomes. Either Trump or Clinton will win. But what happens if it is close enough that it can’t be called until Wednesday or Thursday? To me that is what the six-days-to-expiration implied volatility is telling me. We shall see. Click here for a no-risk trial subscription that will give you instant access to a 24/7 chat room that draws savvy traders from around the world.

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